Today the Reserve Bank of New Zealand just announced another interest rate cut by 25 basis points bringing the OCR down to the lowest it has ever been: 2%
What makes this so interesting is that it is a growing trend around the world with Australia only having cut their OCR mere weeks ago. The second bizarre thing about the RBNZ dropping the rates is there was no real need. Traditionally interest rates have been used to stimulate or control an economy, a dropping interest rate would indicate the economy was in trouble and therefore people should be able to borrow more in order to spend more.
Yet today the RBNZ cited the reason being due to the high NZ dollar. New Zealand is getting involved in a currency war, determined to drive down the value of the dollar in order to make help NZ exports appear more attractive.
But what does this mean for you?
Ironically the RBNZ seems to be fighting the growing house prices by making it easier and better for people to invest. Yes sure they have introduced LVR restrictions, but they are making the cost of borrowing extremely cheap and more importantly driving deposit holders to start chasing higher interest rates elsewhere, meaning private money lending now looks a whole lot more attractive.
For people who have had issues with getting bank finance before, there are a whole heap more opportunities within the private money sector for you to borrow private money, avoid all the LVR restrictions and keep doing deals.
Secondly for those bigger investors who the LVR restrictions don’t affect anyway – suddenly have access to extremely cheap money meaning they can do deals with less margin as the holding costs are not so damaging.
With Graeme Wheeler announcing more cuts likely in the future, now could be your biggest opportunity. The only question is are you going to seize that opportunity, or let it pass you by?
“Opportunities are like sunrises, if you wait too long you will miss them” William Arthur Ward